In March, 500 members of the Conservative family congregated at the Guildhall in London to celebrate the fiftieth anniversary of the foundation of the Centre for Policy Studies (CPS) by Margaret Thatcher and Keith Joseph. The dinner was attended by the Prime Minister, who spoke alongside Robert Colville, the CPS’s director. Entitled The Blueprint for Growth, Colville’s speech opened with the words:

Mervyn King once said that if you look at Britain’s GDP since the Second World War, only two dates really stand out: 1979 and 2008. One where we started to become richer, and one where we suddenly became poorer. The first great inflection point would not, and could not, have happened without the Centre for Policy Studies.

Later the same month, Policy Exchange launched Economic Transformation: Lessons from History, a new paper investigating eight case studies of rapid economic growth, from Thatcher’s Britain to postwar Germany and Hong Kong.

The free-market think tanks are aligned. It wouldn’t be hard to find similar statements from the Institute of Economic Affairs, the Adam Smith Institute, and the Taxpayers’ Alliance asserting that the Thatcher government had stimulated economic growth in the UK. This is a problem because it isn’t true.

The greatest historian of economic facts was the late Angus Maddison of the Organisation for Economic Co-operation and Development (OECD), whose legacy has been maintained by the Maddison Project Database at the University of Groningen in the Netherlands. Below, courtesy of Our World in Data, are its figures for British economic growth since 1944.

They are presented as a log graph because that displays rates of economic growth most accurately, but a linear graph would show the same story: and the story is that nothing changed in 1979.

GDP chart - for commentary

Thatcher did dramatic things in Britain. She tamed the unions and inflation, lifted exchange controls, privatised, cut marginal tax rates, and redistributed wealth and income from the poor to the rich. She also raised national morale. But the one thing she didn’t do was raise rates of economic growth.

This matters, because the free-market think tanks propagate the false view that she did, from which we get such unhappinesses as Brexit, Liz Truss, and the Institute for Free Trade, as well as the current state of the Conservative Party.

People suppose Thatcher stimulated economic growth because she told a good story, courtesy of Friedrich Hayek. He argued that markets signal information better than do governments, which are dependent on bureaucratic chains of data-gathering that are vulnerable to distortion, bias, and error. He also argued that the private sector is motivated to deliver, whereas nationalised industries—sheltered from commercial pressures—are uncompetitive and inefficient.

Moreover, even people who did not read Hayek could suppose that the unremitting strikes and inflation of the 1970s must have damaged economic growth and that Thatcher—by taming them—must have stimulated economic growth.

Yet it transpires that markets do not always transmit information with optimal efficiency; that the private sector has its own incompetencies and perverse incentives; and that strikes and inflation are much less damaging to economic growth than might have been supposed.

But in an ironic twist on Hayek’s information thesis, it has been the private sector Tory-leaning newspapers that have propagated myths about 1979 and GDP growth—so effectively that we’ve all bought into them. Those who looked to the free market think tanks for some critical thinking in this area were to be disappointed.

The Conservatives are the most successful political party in history because we British pioneered the Industrial Revolution, so we created the first party to defend the interests of earned capital. For as long as the UK has a commercial economy, therefore, the Tories will survive.

Nonetheless we could do without the setbacks, and the next election will deliver one of those, in large part because we pursued policies that assumed that Thatcher’s government had stimulated economic growth.

If we want to get re-elected sooner rather than later, we should absorb the facts rather than the myths of 1979.